Gasoline Marketers of VT, Inc. v. VT Agency of Natural Resources
Annotate this Case
Gasoline Marketers of VT, Inc. v. Agency of Natural Resources (98-417);
169 Vt. 504; 739 A.2d 1230
[Filed 27-Aug-1999]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
No. 98-417
Gasoline Marketers of Supreme Court
Vermont, Inc., et al.
On Appeal from
v. Washington Superior Court
Vermont Agency of Natural Resources March Term, 1999
Matthew I. Katz, J.
R. Bradford Fawley, Robert A. Miller, and Timothy E. Copeland of Downs
Rachlin & Martin, PLLC, Brattleboro, for Plaintiffs-Appellants.
William H. Sorrell, Attorney General, and Ron Shems, Leslie Jones and
Elizabeth Lord, Assistant Attorneys General, Montpelier, for
Defendants-Appellees.
PRESENT: Amestoy, C.J., Morse, Johnson and Skoglund, JJ., and Zimmerman, D.J.,
Specially Assigned
JOHNSON, J. The question presented by this case is whether the
Agency of Natural Resources (ANR) adequately considered the economic
effect on small businesses when it promulgated regulations to control
vapor emissions at gasoline pumps. Appellant Gasoline Marketers of
Vermont, Inc. (GMOV) contends that the regulations are invalid under the
Vermont Administrative Procedures Act (VAPA), 3 V.S.A. §§ 801-849, because
ANR defined a "small business" as a business that sells less than 400,000
gallons of gas per year, rather than as a business with twenty or fewer
full-time employees, the definition provided by VAPA. See 3 V.S.A. §
801(b)(12). We conclude that ANR's definition is better calibrated to
assess the economic impact of the regulation at issue and that the agency
has, therefore, demonstrated
compliance with the statute. We affirm.
GMOV, a consortium of gasoline marketers, appeals from a decision in
favor of ANR on cross-motions for summary judgment. The parties concede
there are no contested issues of fact; therefore, the only question is
whether ANR is entitled to judgment as a matter of law, which we review de
novo. See Bacon v. Lascelles, 165 Vt. 214, 218, 678 A.2d 902, 905 (1996)
(summary judgment appropriate where there are no disputed issues of
material fact and movant is entitled to judgment as matter of law).
The regulations challenged in this case are known as "Stage II"
regulations, which refers to a method of vapor recovery at a gasoline
pump. Stage II regulations implement the requirements of the Clean Air
Act, 42 U.S.C. §§ 7401-7671g, and the Northeast Ozone Transport Region, 42
U.S.C. 7511c(a). Under 10 V.S.A. § 558, the Secretary of ANR has the
authority to "establish such emission control requirements, by rule, as in
[her] judgment may be necessary to prevent, abate, or control air
pollution." The regulations require gasoline stations with a throughput
of 400,000 gallons or more of gasoline per year to install vapor recovery
systems on their pumps. Stations selling less than 400,000 gallons per
year are exempt. The effect of the 400,000 gallon regulatory threshold is
to exempt approximately 70% of gasoline stations state-wide while
capturing over 70% of total gasoline station emissions.
The proposed Stage II regulations were published on January 19, 1996.
A public hearing on the regulations was held on March 6, 1996, and public
comments were accepted through May 6, 1996. The final rule, which was
altered significantly from the original proposed rule, was filed with the
Secretary of State on June 17, 1996. It provided, inter alia, that: (1)
gasoline stations with a throughput of 400,000 gallons or less would be
exempt from the regulation (increased from the 240,000 gallon regulatory
threshold of the original proposed rule); (2) of
the stations with throughput of 400,000 gallons or more, those with lower
throughput would be permitted more time to comply with the regulations;
(FN1) (3) regulated stations would visually inspect the vapor recovery
equipment once a week; (4) initial compliance would be re-tested at least
every five years; and (5) station owners would verify the initial
compliance and maintain records of any maintenance, repair or replacement
of the system. The Economic Impact Statement attached to the final rule
estimated the costs of compliance based on throughput as well as a variety
of other factors.
GMOV sought a declaratory judgment that the Stage II regulations
promulgated by ANR were invalid because ANR had failed to consider the
impact of the regulations on small businesses as required by 3 V.S.A. §§
832a and 838(c)(2).(FN2) In its order granting summary judgment to ANR,
the trial court concluded that GMOV was seeking to impose a "hyper-
technical" reading of the statute on ANR by emphasizing the definition of
"small business" as a business with twenty or fewer full-time employees to
the exclusion of other elements of the statutory scheme. The trial court
pointed to the fact that, in assessing the impact on small businesses, the
agency is only required to look to information readily available to it and
that ANR may not significantly reduce the effectiveness of its regulations
in order to accommodate small businesses. Furthermore, the trial court
determined that the agency had adopted a number of measures specifically
designed to ease the impact on small businesses, including the 400,000
gallon regulatory threshold, the phase-in compliance schedule, and minimal
reporting and testing
requirements. This appeal followed.
On appeal, GMOV argues that ANR has failed to comply with VAPA because
it did not make a sufficient demonstration of compliance with VAPA's
requirement that an agency consider the impact of a regulation on small
businesses. In particular, GMOV emphasizes that ANR did not employ the
statutory definition of "small business" as a business employing twenty or
fewer full-time employees. See 3 V.S.A. § 801(b)(12). GMOV contends,
inter alia, that ANR failed to identify which gas stations were small
businesses, determine how many gas stations were small businesses,
calculate what volume of gas they sold, and analyze the cost of compliance
for them. GMOV further alleges that the information necessary to complete
this analysis was readily available to ANR. GMOV argues that "Defendant's
presumption that throughput is an accurate indicator of the number of
employees of a business is wrong." (FN3)
As an initial matter, we clarify the standard of review. While it is
true that, absent a
clear and convincing showing to the contrary, decisions made within the
expertise of administrative agencies are presumed to be correct, valid,
and reasonable, see In re Professional Nurses Serv., Inc., 164 Vt. 529,
532, 671 A.2d 1289, 1291 (1996), the requirements of VAPA are not within
the substantive expertise of an agency, and therefore the question of
whether an agency has complied with these requirements is not accorded
similar deference, see In re Diehl, 158 Vt. 549, 551, 614 A.2d 1223, 1225
(1992).
Under Vermont law, ANR was obligated to consider the impact of its
regulation on small businesses. 3 V.S.A. § 832a(a)-(b) provides:
(a) Where a rule provides for the regulation of a small business, an
agency shall consider ways by which a small business can reduce
the cost and burden of compliance by specifying less numerous,
detailed or frequent reporting requirements, or alternative methods
of compliance.
(b) An agency shall also consider creative, innovative, or flexible
methods of compliance with the rule when the agency finds, in
writing, such action would not:
(1) significantly reduce the effectiveness of the rule in
achieving the objectives or purposes of the statutes being
implemented or interpreted; or
(2) be inconsistent with the language or purpose of statutes
that are implemented or interpreted by the rule; or
(3) increase the risk to the health, safety, or welfare of the
public or to the beneficiaries of the regulation, or
compromise the environmental standards of the state.
Section 838(a)(2) requires that an agency filing a proposed rule include an
economic impact statement, while section 838(c) provides that the economic
impact statement analyze the anticipated costs and benefits to be expected
from adoption of the rule, and include a flexibility statement that
"compare[s] the burden on small businesses by compliance with the rule to
the
burden which would be imposed by alternatives considered under section 832a
of this title." Additionally, "[o]nly employees of the agency and
information either already available to the agency or available at
reasonable cost shall be used in preparing economic impact statements."
Thus, § 838(c) obligates ANR to consider the impact of a regulation on
small businesses, and to consider either less burdensome reporting
requirements or alternative methods of compliance. Under section 832a(b),
ANR should consider flexible compliance for small businesses only when it
concludes that such an approach will not significantly reduce the
effectiveness of the regulation, contradict the regulatory goals, or
increase health or safety risks. The statute does not in any way prevent
ANR from ultimately deciding to impose the same regulatory requirements on
small businesses as on all other regulated businesses if it concludes that
imposing different regulatory requirements would compromise the efficacy of
the regulation. The only obligation is to consider alternatives; ANR need
not implement any one of them. In other words, the small business
provisions of the statute confer no substantive rights on small
businesses, or impose any substantive obligation on ANR. Nor do they
provide small businesses with any additional grounds to contest a
regulation, absent ANR's failure to consider the enumerated alternatives.
It cannot be argued that VAPA prevents ANR from legitimately reaching
the ultimate regulatory result in this case. ANR could have reached the
same result even while strictly complying with GMOV's interpretation of
VAPA's requirements. That is, ANR could have researched and listed all
businesses with twenty or fewer full-time employees; analyzed the cost
burden of compliance for this group and the degree of flexibility that
would preserve environmental standards; and concluded that the most
effective way to ease the impact on small businesses while preserving the
regulation's goals would be to exempt stations with an annual
throughput of 400,000 gallons or less, phase-in compliance for all other
stations based on volume of throughput, and minimize reporting and testing
requirements. At most what was missing in this case was a statement by
the agency that it was implementing an alternative definition of "small
business" more closely related to the purposes and economic impact of the
regulations.
Thus, GMOV's quarrel can only be with the method by which ANR reached
its result, and not with the result itself. While the decision whether to
conduct an analysis of the impact of a regulation on small businesses is
not a discretionary matter within the agency's expertise, the manner in
which it conducts the analysis does fall within the agency's expertise, and
hence is accorded appropriate deference. See In re Professional Nurses
Serv., Inc., 164 Vt. at 532, 671 A.2d at 1291. For this reason, a
regulated entity can require that ANR's methodology not be arbitrary and
capricious, but it cannot demand that ANR use any particular methodology as
opposed to another. Here, ANR's methodology was reasonable, both in
minimizing the cost burden of compliance and maximizing attainment of
environmental standards. Given the purposes of the regulation, the
throughput measure of small businesses was more relevant both in terms of
economic impact (the requirements of 3 V.S.A. §§ 832a(a) and 838(c)) and
efficacy of the regulations (the requirement of 3 V.S.A. § 832a(b)). It
would be illogical to forbid the agency from operating in a manner that
was rational and effective.
GMOV's primary contention is that "at least 27 gas stations with less
than 21 full time employees" (i.e., statutorily defined small businesses)
"all must comply with the Stage II Regulations." In essence, GMOV argues
that a business' status as a statutorily defined "small business" should
somehow exempt it from regulation, or at least assure that it will not be
regulated in the same manner as other businesses, lest VAPA's small
business provisions be
violated. But ANR clearly has the authority to regulate small businesses
in the same manner as other businesses, if it determines after
consideration that to do otherwise would compromise environmental
standards. See 3 V.S.A. § 832a(b)(1)-(3). In other words, the definition
of a small business as one with twenty or fewer employees does not vest
such businesses with any substantive rights nor impose any substantive
obligation on ANR with respect to its regulation of such businesses. It
merely provides a preliminary guideline directing ANR's analysis of the
economic impact of a regulation.
The cases cited by GMOV deal with situations where the agency has
failed to conduct any small business analysis at all. See Northwest
Mining Ass'n v. Babbitt, 5 F. Supp. 2d 9, 15 (D. DC 1998) (agency claimed
that there was no impact on small businesses); Fremont Lumber Co. v.
Energy Facility Siting Council, 936 P.2d 968, 973 (Ore. 1997) (fiscal
impact statement invalid because it failed to "state clearly and
affirmatively that costs might be involved, so that interested persons are
alerted to that possibility"); Dika v. Department of Ins. and Fin., 817 P.2d 287, 288-89 (Ore. 1991) (fiscal impact statement invalid because it
did not make required projection as to economic effect of regulation, but
simply stated that there would be economic effect); Stuart Yacht Club &
Marina, Inc. v. Department of Natural Resources, 625 So. 2d 1263, 1269
(Ct. App. Fl. 1993) (agency concluded that proposed regulation would have
no impact on small businesses because it assumed that all businesses that
fell below relevant regulatory threshold would be "small businesses").
There is no allegation in the instant case that ANR failed to acknowledge
that compliance with the proposed regulation would entail certain costs, or
that ANR eschewed the statutory definition without replacing it with a more
functional one. Unlike the agencies in the above cases, which denied that
there was any impact on small businesses, ANR included the regulatory
threshold and the phase-in compliance schedule in an
attempt to tailor the regulations to minimize the cost of compliance for
small businesses and maximize the efficacy of the regulations at once.
We agree with the trial court that GMOV has attempted to impose a
hyper-technical reading of the statute on ANR. By employing a definition
of small business that is at once sensitive to the costs of compliance and
the environmental goal to be achieved, ANR promulgated a regulation that
exempts approximately 70% of gasoline stations state-wide while capturing
over 70% of total gasoline station emissions. ANR's approach is reasonable
on its face. ANR's decision to use an alternative definition of "small
business" is not of the kind that will prevent a rule from taking effect.
See 3 V.S.A. § 846 (listing which violations of VAPA will prevent rule
from taking effect; which violations will not prevent rule from taking
effect; and providing in § 846(c) that, "[f]or other violations of this
chapter, the court may fashion appropriate relief") Furthermore, the
concerns of VAPA's small business provision and flexibility provision are
minimizing the cost burden of compliance and preserving environmental
standards if flexible enforcement options are used. These goals were
achieved through ANR's approach in this instance. We conclude that while
ANR could have explained more clearly that it was substituting the
statutory definition of a small business with the more relevant throughput
standard, this omission did not substantively violate VAPA, and to the
extent that there was any technical violation, we will not invalidate the
regulation on that basis.
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
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Footnotes
FN1. Specifically, stations with throughput of 1,200,000 gallons or greater
were required to comply by December 31, 1997; with 1,000,000 gallons or
greater by December 31, 1998; with 700,000 gallons or greater by December
31, 1999; and with 400,000 gallons or greater by December 31, 2000.
FN2. Although there were originally four counts in GMOV's complaint, all
but Count I (alleging violations of the VAPA's small business provisions)
were withdrawn.
FN3. On appeal, ANR contends that the merits of GMOV's arguments should not
be reached because GMOV has not established standing and GMOV is estopped
from contesting the regulation because they participated in the notice and
comment period, and therefore participated in the rule's promulgation.
Appellee ANR cannot raise standing for the first time on appeal, affording
GMOV no opportunity to present additional facts establishing standing. See
McLaughlin v. State, 161 Vt. 492, 495, 642 A.2d 683, 685 (1994); Coty v.
Ramsey Assoc., Inc., 149 Vt. 451, 469, 546 A.2d 196, 208 (1988) (standing
is an affirmative defense that must be raised at trial and will not be
resolved on appeal otherwise). The fact that standing is a threshold
jurisdictional issue does not relieve a defendant of the burden of raising
it at trial.
ANR further argues that GMOV is estopped from challenging the
regulation for failure to apply the statutory definition of small business
because none of the members of GMOV who submitted comments during the
notice and comment period raised this point, despite the fact that they
knew that ANR was applying the throughput criterion. Again, this is a
defense that ANR was obligated to raise at trial in order to preserve the
issue for appellate review. Furthermore, 3 V.S.A. § 846(d) provides that
"[a]n action to contest the validity of a rule for noncompliance with any
of the provisions of this chapter . . . must be commenced within one year
after the effective date of the rule." Thus, it is inconsistent with the
statute to argue that challenges to a rule under the VAPA are required to
be inaugurated during the notice-and-comment period itself.
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